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Long term investing can be life changing when you buy and hold the truly great businesses. And we’ve seen some truly amazing gains over the years. For example, the Therma Bright Inc. (CVE:THRM) share price is up a whopping 500% in the last half decade, a handsome return for long term holders. This just goes to show the value creation that some businesses can achieve. It’s down 14% in the last seven days.
With just CA$9,143 worth of revenue in twelve months, we don’t think the market considers Therma Bright to have proven its business plan. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. Investors will be hoping that Therma Bright can make progress and gain better traction for the business, before it runs low on cash.
We think companies that have neither significant revenues nor profits are pretty high risk. There is usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets. So the share price itself impacts the value of the shares (as it determines the cost of capital). While some such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Therma Bright has already given some investors a taste of the sweet gains that high risk investing can generate, if your timing is right.
Therma Bright had liabilities exceeding cash by CA$410,497 when it last reported in January 2019, according to our data. That puts it in the highest risk category, according to our analysis. So we’re surprised to see the stock up 43% per year, over 5 years, but we’re happy for holders. Investors must really like its potential. You can click on the image below to see (in greater detail) how Therma Bright’s cash levels have changed over time.
In reality it’s hard to have much certainty when valuing a business that has neither revenue or profit. One thing you can do is check if company insiders are buying shares. If they are buying a significant amount of shares, that’s certainly a good thing. Luckily we are in a position to provide you with this free chart of insider buying (and selling).
A Different Perspective
Investors in Therma Bright had a tough year, with a total loss of 14%, against a market gain of about 0.5%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 43% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares – and the price they paid.
Therma Bright is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.